British vote upset leaves European shares in choppy waters

* STOXX up 0.3 pct at close, FTSE gets sterling boost

* Financials, basic resources provide biggest sectoral boost

* Domestically exposed UK stocks drop (Adds detail, updates prices at close)

By Danilo Masoni and Kit Rees

MILAN/LONDON, June 9 (Reuters) - European stocks were choppy on Friday after Britain's election delivered no clear winner on the eve of Brexit talks, though a slump in sterling gave an edge to shares in UK exporters.

The pan-European STOXX 600 index ended the session 0.3 percent higher, having moved in and out positive territory throughout the day, while the UK's internationally-facing blue chip FTSE 100 index outperformed with a gain of 1 percent.

"Whilst a hung parliament was not the specific outcome that many expected, asset prices in the UK and to a certain extent globally, already discounted a period of extended political uncertainty given the complexity of delivering on the outcome of last year's EU referendum," said Paras Anand, CIO European Equities at Fidelity International.

"Simply put, that we are facing a period of political uncertainty is nothing new," he added.

After hitting their highest level in nearly two years in May on the back of a surprisingly strong earnings seasons and record inflows, European equities have been moving sideways with investors seeking fresh catalysts to extend the rally.

British voters dealt Prime Minister Theresa May a devastating blow in a snap election she had called to strengthen her hand in Brexit talks, wiping out her parliamentary majority and throwing the country into political turmoil.

That prompted sterling to fall as much as 2.5 percent, which in turn gave a strong boost to British companies which sell outside their country. Among them were packaging firm Smurfit Kappa, miner Antofagasta (Other OTC: ANFGF - news) , bank Standard Chartered and oil major BP, all up between 2.5 and 5 percent.

In turn, companies that make most of their revenues in the UK were hit with Lloyds Bank down 1 percent and supermarket Marks and Spencer down 1.8 percent.

Some investors said May's failure to get a strong hand in parliament lowered the chances of a so called "hard Brexit", a development which could ultimately boost the pound.

"The outcome is a clear near-term market negative, but in the medium-term the probability of shifting the UK towards a 'softer' Brexit position and less fiscal tightening have increased,” Deutsche Bank FX strategist George Saravelos said in a note to clients.

On the broader European market, Italian bank UBI Banca (Amsterdam: UF8.AS - news) rose 3.5 percent, among top gainers on the STOXX, as investors were upbeat about a possible rescue of two troubled regional lenders. Traders also cited an upbeat note from local broker Equita which upgraded the stock to "buy", saying that the market had underestimated the benefits of an acquisition.

Basic resources (Frankfurt: W8Z.F - news) stocks also helped lift the STOXX as copper prices rose, helped by supply concerns in Chile (Stuttgart: 704599.SG - news) and recent data pointing to robust import demand from China.

Back in the UK, utilities including Centrica (Frankfurt: A0DK6K - news) and SSE (Amsterdam: UW8.AS - news) all rose before trimming gains as prospects of a hung parliament diluted risks of harsher regulation - the Conservatives and Labour party have both proposed tariff caps.

Stocks linked to the British housebuilding industry were the biggest STOXX fallers.

Builders merchant Travis Perkins (Frankfurt: 893509 - news) fell 3 percent, Howden Joinery (Frankfurt: 884600 - news) dropped 2.8 percent and housebuilder Berkeley Group was down 3.6 percent.

UK travel stocks and pub companies also fell, while the domestically exposed FTSE 250 index recovered to end 0.1 percent higher.

"So lots of uncertainties and the domestic political and economic path forward is murky. However for UK equities the outlook is more measured and we will be looking for selective buying opportunities," said Richard Colwell, Head of UK Equities at Columbia Threadneedle Investments. (Reporting by Danilo Masoni and Kit Rees; Editing by Toby Chopra)